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Intragenerational externalities and intergenerational transfers

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  • KOLMAR, MARTIN
  • MEIER, VOLKER

Abstract

In an environment with asymmetric information and intragenerational externalities, the implementation of a first-best efficient Clarke-Groves- Vickrey mechanism may not be feasible if it has to be self-financing. By using intergenerational transfers, the arising budget deficit can be covered in every generation only if the initial allocation is not dynamically efficient. While introducing a pay-as-you-go scheme without addressing the externality already yields a Pareto improvement, further welfare gains can be captured by using the additional resources to achieve a perfect internalization.

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Bibliographic Info

Article provided by Cambridge University Press in its journal Journal of Pension Economics and Finance.

Volume (Year): 11 (2012)
Issue (Month): 04 (October)
Pages: 531-548

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Handle: RePEc:cup:jpenef:v:11:y:2012:i:04:p:531-548_00

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  9. Berthold U. Wigger, 2000. "Pareto-improving intergenerational transfers," CSEF Working Papers 37, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
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  16. Hans-Werner Sinn, 2000. "Why a Funded Pension System is Needed and Why It is Not Needed," International Tax and Public Finance, Springer, vol. 7(4), pages 389-410, August.
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Cited by:
  1. Gonzales-Eiras, Martín & Niepelt, Dirk, 2004. "Sustaining Social Security," Seminar Papers 731, Stockholm University, Institute for International Economic Studies.
  2. Wolfgang Eggert & Tim Krieger & Volker Meier, 2007. "Education, Unemployment and Migration," CESifo Working Paper Series 2119, CESifo Group Munich.

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